Covered in $30 Billion Debt, Embattled Valeant Mulls Over Which Assets to Sell
April 19, 2016 (Last Updated: 10:15am PT)
By Alex Keown, BioSpace.com Breaking News Staff
LAVAL, Quebec – Investors and business analysts are looking for Valeant Pharmaceuticals to begin unloading some of its assets, but the big question is which ones are up for sale?
The company is shouldering $30 billion in debt due to a series of aggressive M&A practices, however the company’s market capitalization has plunged dramatically from $90 billion to $11 billion, Reuters reported this morning. Both outgoing Chief Executive Officer Michael Pearson and top investor and board member Bill Ackman have indicated the company could look to dump “noncore assets.” In addition to the debt the company is shouldering, Valeant has seen its credit rating downgraded. Earlier this month, Standard & Poor's cut its credit rating for Valeant to “B” from a “B+.” S&P also lowered Valeant’s secured debt rating to “BB-“ from “BB,” Reuters said.
The embattled Canadian pharmaceutical company has talked about divesting itself of some of its assets in order to pay down its massive debt. As Valeant faces the possibility of defaulting on some of its $30 billion in debt, the company has brought in investment banks to review its financial options. At one time, Bausch & Lomb was considered by Bill Ackman, a new member of the company’s board of directors and one of Valeant’s biggest investors, to be on the table for divesture, but that tune has changed. Since Ackman joined the company’s board of directors, Valeant, one of the recent kings of M&A activity, snapped up Bausch & Lomb in 2013 for $8.7 billion. The company known for its contact lens and lens-care products, generates about $1.5 billion in annual revenue. Bausch & Lomb has a long history of being a stable company and if Valeant would place the division up for sale, it would likely earn top dollar, Fox Business noted. Annabel Samimy, an equity analyst at Stifel, told Reuters Bausch and Lomb could command as much as $20 billion if Valeant were to put the division up for sale.
Since announcing its openness to sell off noncore assets, Valeant has been approached by a number of inquiries from perspective buyers, Reuters reported earlier in April, citing unnamed sources.
As Valeant closes in on selling off its assets, something that has been nearly the complete opposite of what the company has done over the past few years as one of the biggest serial acquirers, the question is which ones?
One asset that might be on the table is the irritable bowel syndrome treatment Xifaxan, which Valeant acquired last year when it snapped up Salix . That drug could hit $1 billion in revenue this year, Reuters said. Other assets that could be up for sale include the company’s aesthetics products, Obagi and Solta. David Amsellem, an analyst at Piper Jaffray, told Reuters the above products would likely fare better at a different company than Valeant.
One asset that Valeant is not likely to offer for sale is its female libido drug, Addyi, which the company added to its pipeline last year when it snapped up Raleigh, N.C.-based Sprout for $1 billion. Addyi is prescribed for women with hypoactive sexual desire disorder. However, sales for the drug have been subpar, with Valeant terminating more than 100 external sales associates that came with the acquisition of Sprout. The drug became available Oct. 17, 2015 and within the first few weeks, only 227 prescriptions had been written. Despite the dismal sales of the drug, selling off the drug would cause the company to “suffer a write down on its balance sheet “and further depress the stock, Reuters said.